Thursday, October 10, 2013

Push the accelerator. Feel the power tilt you over and suck your eyes into your head. In complete silence. Electric cars are the future, and in Tesla's revolutionary Model S, the future is here.

For those who live under a rock, Tesla has successfully brought their second generation sedan to market. Sleek, slippery, sexy, and stuffed with semiconductors, it may finally be the computer industry's answer to Detroit.

Tesla's CEO Elon Musk gave the Caltech commencement address in 2012. In case you forgot, he mentioned that in building the Model S, Tesla set out to create a car that was superior to its competitors in every way. One year later, it has scooped three major industry awards; Car of the Year from both Automobile Magazine and Motor Trend. The third was self-awarded, when an analysis of their test results revealed the Model S was the safest car ever tested by NHTSA.

Whereas most other electric cars on the market are glorified golf carts with all the performance and allure of Caltech's own electric fleet, Tesla somehow managed to optimise in the opposite direction. An analysis of this achievement is illustrative for anyone with an engineering or problem solving bent. Indeed, in proving the naysayers wrong Tesla finagled a short squeeze of their own stock, enabling a follow-on stock offering and the raising of an additional US$1.1b.

The most prominent electric car released since the Tesla is BMW's i3. While its carbon fibre chassis does feature some reasonably innovative ideas, its styling is an echo of the pre-Tesla era. All car manufacturers that operate in the United States have to deal with interlocking state-by-state compliance issues of Byzantine complexity.

One of the most effective is California's requirement that a certain number of electric cars be produced, presumably to spur technology development by reluctant and largely calcified giants that only 5 years ago required taxpayer-funded bailouts to remain solvent. The general response to this was to produce a series of cars of underwhelming utility, price, and attractiveness. Unsurprisingly and, indeed, by design, these cars have not sold well, despite aggressive and loss-inducing cuts in price.

After the compliance car program ran its course, it is a safe bet that industry lobbyists would be parroting their 'market has spoken' mantra, with dismal sales figures across the board suggesting that California's absurdly green and possibly communist electric car policies be repealed. In case the crummy range and worse performance of these mostly compact conversions wasn't enough to do them in, designers gleefully decked them out with a variety of gag-inducing styling decisions. No doubt this appeals to the particularly hard-core Hollywood advocate types, in that owning one of these cars (the Mitsubishi iMiEV comes to mind) is incontrovertibly honest signalling that you are very, very serious about the environment. Can you imagine being a recently graduated engineer assigned to work on one of these hopeless Potemkin car electrification projects? I wonder how many of them were caught vainly licking the terminals of a 400V battery pack.

When the Nissan Leaf and Chevy Volt were designed, Tesla was a peculiar Silicon Valley venture producing a few hundred fast and quiet Lotus Elises (the Roadster) a year. In 2008 they laid off a bunch of people and nearly went out the back door. At best, a curiosity. By the time BMW sat down with their designers, Leaf and Volt sales data all but confirmed that the consumer wasn't biting. All that was needed was an unsuccessful offering from one of the most respected manufacturers in the world, and by the end of 2014, these cars would be nothing but a footnote in a book about unsuccessful meddling in the free market.

I can almost imagine a meeting amongst the BMW i3's product development people. Someone who's new on the job asks "But what about the Tesla WhiteStar?". The room erupts in laughter. The Roadster was out of production. A few rumours swirled around robots in the old NUMMI plant. Tesla stock was the most shorted on the exchange and lurched unsteadily ever lower. The CEO was rambling about launching rockets, but so far had mostly only blown them up. Even people signing parts supply deals with Tesla were buying good insurance and snickering behind their hands. Several respected automotive industry analysts had predicted that Tesla would produce no more than 3000 cars, before inevitable problems, glitches, and perhaps a fatal fire or two would trigger the final death spiral.

If I had to guess at what point the phones started ringing, I would guess May 8 2013. Tesla had forecast a profitable third quarter. Instead, the sale of emissions credits had pushed it over the line in the first quarter. Within days, panicked hedge funds had tried to close their short positions, and a deep lack of share availability had pushed the price up by a factor of three. Suddenly Tesla went from 'the next Solyndra' to 'the next Apple'. As the cars became more available (nearly 20000 have been built to date), competitors' engineers would have got their hands on one and finally seen what they were up against.

At BMW, it was too late. You can tell their i3 launch promotional material is hastily redesigned to be as forgettable as possible. Industry blogs changed tack from 'when will Tesla finally declare bankruptcy' to 'Tesla's competitors hot on their heels'. As we shall soon see, Tesla has already set the standard. From here, they have only themselves to beat.

Against this maelstrom of chaos and confusion, two prominent car makers have been relatively calm and collected. Daimler and Toyota both bought stakes in Tesla during its years of perdition, and both have now produced unoffensive though unspectacular cars using the Tesla drive train. From here, Tesla's aggressive roll out of supercharger technology could well mean the creation of an ecosystem which will become the defacto national standard. Provided they suffer no major missteps, theirs is the market to dominate. Friendly manufacturers like Toyota and Daimler can exploit their business relationship and leverage their access to superior technology, while their competitors face a more stark choice, between participation by licensing at the market rate or an inevitable slide into obsolete irrelevance. A third option, aggressive innovation and competition, is also possible and, broadly, a desirable outcome. Either way, Tesla's aim of creating and aggressively growing the electric car market is assured.

At this point I should mention that Hyundai's strategy for sustainable transportation was through research and IP development in hydrogen fuel cells. Battery technology was better than hydrogen could ever be four years ago, so I really hope they have something else in the works by now.

Thus far I've heaped praise and scorn in equal measures, so lets get to the nitty gritty.

Car

Base price ($)

0-60mph (s)

Range (miles)

Safety

Tesla Model S

69,900

4.2

265

✭✭✭✭✭

Chevy Spark

27,495

7.6

82

✭✭✭✭

Nissan Leaf

28,800

9.8

75

✭✭✭✭✭

BMW i3

42,275

7.0

80

✭✭✭✭✭

Ford Focus EV

39,995

9.5

76

✭✭✭✭✭

Smart Electric

25,750

22.4

65

✭✭✭✭

Fiat 500e

32,500

9.1

87

✭✭✭✭✭

Toyota RAV4 EV

49,800

7.0

103

✭✭✭✭

Mitsubishi iMiEV

29,125

11.9

62

✭✭✭✭

Honda Fit

36,625

8.4

70

✭✭✭✭

Renault Zoe

27,250

8.2

60

✭✭✭✭✭

Rimac Conc. 1

980,000

2.8

300

NA

Tesla Roadster

109,000

3.7

244

NA

In the above table, the safety rating is poorly resolved. It's worth noting that your actual outcome in a two car collision is highly dependent on your mass. The Tesla weighs more than an SUV, and has, so far, hit a Honda Accord, a power pole, and a restaurant and won. Most of the other electric cars are compacts or sub-compacts, and their safety rating should be taken as such. It was during consideration of the Tesla Model S's safety tests that I realised the sense in which the BMW i3 and the Tesla are actually comparable.

The resemblance is uncanny.

A brief note on Tesla's technology. Almost all of Tesla's competitors use third party systems provided by either AC Propulsion or A123 systems. The same A123 whose exploding batteries caused it to enter bankruptcy. They re-registered the company as B456, not realising of course that B456 is a common fire extinguisher specification. How apt.

On the other hand, Tesla has a bunch of its own IP on technology. Not wanting to be hamstrung when ramping up volume, they developed technology that does not depend on rare-earth materials, heavy batteries, or any other highly specific technology. Their battery packs are made of around 7800 laptop cells. Instead of large, expensive and specific 'automotive' batteries, the 18650 package provides the benefits of enormous mass production, scaleability, and statistical reliability. Coupled with intelligent battery management software, a much more versatile pack results. When performance degrades, problematic cells can be substituted robotically, giving a cheap upgrade. The Tesla battery pack also forms part of the car's chassis, increasing stiffness and also providing for battery swapping capability. Each cell provides 3100mAh of electricity at 3.7V, and together the battery can provide 1200A at around 340V, delivering 310kW to the powertrain. In charging it can accept 120kW (at around 250A) for a ~40 minute charge.

When optimizing electric motors, the usual approach is to use high voltages and thin wires, combined with powerful magnets. Tesla uses a liquid cooled AC induction motor. It doesn't have permanent magnets, and thus its power depends on high current. The Tesla motor is optimised for low voltage, high current, and high torque, something the battery pack can readily provide.

Of the many innovations developed in the Model S, the last I'll present is the user interface software. Tesla uses a large touch screen to operate everything except the hazard lights and the glove compartment. Software updates can be downloaded via mobile networks. The car can be upgraded, fixing issues, adding functionality, and altering the mood with time. The modular, software-based approach will redefine the usual lifecycle of a car as a consumer product.

With any luck, we'll see these obvious (in hindsight) ideas applied in future cars across the industry. But what does the future hold for Tesla?

Going forward, Tesla plans to ramp production of the Model S to meet demand in Europe, North America, and Asia. Starting late 2014, Tesla will begin production and delivery of the Model X crossover. Based on the Model S chassis though somewhat longer and taller, the Model X will seat 7 adults and their luggage, and leverage continuing advances in battery technology for a similar range. The Model X will have an AWD option, which will also flow to the Model S, and may see its 0-60 time reduced even further.

Further ahead, Tesla plans to bring a third generation vehicle(s) to market in about 2017. Based around a smaller common chassis and starting at $35,000, these cars will be produced at a rate of half a million per year, aiming for about 5% of global market share.